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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-11 · 102 added, 65 removed, 200 unchanged (46% of the section changed)

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Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties.

As a result of many factors, including those factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 and set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q for the three months ended March 31, 2023, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

As a result of many factors, including those factors set forth in the “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and this Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

We are a clinical-stage biopharmaceutical company translating insights from genetic epilepsies into the development of therapies for central nervous system, or CNS, disorders characterized by neuronal excitation-inhibition imbalance.

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For our most advanced product candidate under the Cerebrum™ platform, ulixacaltamide (also known as PRAX-944), topline results from the Phase 2b Essential1 clinical trial in essential tremor, or ET, were announced in the first quarter of 2023.

An end-of-Phase 2 meeting is scheduled with the U.S.

Food and Drug Administration, or FDA, in June 2023 and we intend to initiate a Phase 3 study in ET in the second half of 2023.

We intend to initiate two Phase 3 studies in ET in the fourth quarter of 2023, with topline results expected in the second half of 2024.

We initiated the PRAX-562 Phase 2 EMBOLD study in the first quarter of 2023 and expect to announce topline results in the fourth quarter of 2023.

We also announced positive results from our PRAX-628 Phase 1 study in May 2023 and expect to initiate a Phase 2 study in focal epilepsy in the fourth quarter of 2023.

For our most advanced product candidate under the Solidus™ platform, PRAX-222, we expect to announce topline results from the first dose cohort of our EMBRAVE study in the second half of 2023.

We also announced positive results from our PRAX-628 Phase 1 study in May 2023.

In June 2023, we initiated a Phase 2 proof of concept study evaluating PRAX-628 in patients with a Photo Paroxysmal Response, or PPR, with results anticipated by year-end 2023.

Upon completion of the PPR study, we plan to initiate a Phase 2 study in focal epilepsy in the first half of 2024.

For our most advanced product candidate under the Solidus™ platform, PRAX-222, we initiated the first dose cohort of our EMBRAVE study in the second quarter of 2023 and expect to announce topline results in the second half of 2023.

We were incorporated in 2015 and commenced operations in 2016.

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Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates, if approved.

We have incurred recurring operating losses since inception, including a net loss of $37.5 million for the three months

ended March 31, 2023.

As of March 31, 2023, we had an accumulated deficit of $568.1 million.

have incurred recurring operating losses since inception, including a net loss of $71.8 million for the six months ended June 30, 2023.

As of June 30, 2023, we had an accumulated deficit of $602.4 million.

We expect to incur significant expenses and operating losses for the foreseeable future as we expand our research and development activities.

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If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $85.8 million, which we expect will enable us to fund our operating expenses and capital expenditures into the second quarter of 2024.

We have based this analysis on our current cash needs, ongoing research and development plans which are limited to advancing product candidates through, but not beyond their current clinical trial phases and continued operational efficiency.

Since our cash, cash equivalents and marketable securities as of March 31, 2023 may not be sufficient to fund our operations for at least the next twelve months from the date of issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there is substantial doubt about our ability to continue as a going concern.

Our future viability is dependent on our ability to raise additional capital to finance our operations.

We expect to finance our operations through potential public or private equity financings, debt financings, collaboration agreements or other capital sources.

Our inability to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.

There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

As of June 30, 2023, we had cash and cash equivalents of $124.3 million.

We believe that our cash and cash equivalents as of June 30, 2023 will enable us to fund our operating expenses and capital expenditures into the first quarter of 2025.

We have based this analysis on our current financial needs and ongoing research and development plans, which are limited to advancing product candidates through, but not beyond, their current clinical trials and our ulixacaltamide Phase 3 clinical trials in ET.

We have based our assessment on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

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We have not generated any revenue from the sale of products since inception and do not expect to generate any revenue from the sale of products for several years, if at all.

As discussed in Note 7 to our condensed consolidated financial statements, we entered into an Option and License Agreement, or the Collaboration Agreement, with UCB Biopharma SRL, or UCB, in December 2022.

During the three months ended March 31, 2023, we recognized $0.7 million of collaboration revenue from the Collaboration Agreement.

As discussed in Note 7 to our condensed

consolidated financial statements, we entered into an Option and License Agreement, or the Collaboration Agreement, with UCB Biopharma SRL, or UCB, in December 2022.

We recognized $0.8 million and $1.5 million of collaboration revenue from the Collaboration Agreement during the three and six ended June 30, 2023, respectively.

Operating Expenses

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

$ 6,890 $ 26,472 $ 18,025 $ 60,427

9,922 4,186 13,524 10,228

Personnel-related (including stock-based compensation) 6,778 10,735 14,904 21,876

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A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate.

enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time to complete our clinical development activities.

For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect, or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time to complete our clinical development activities.

We may never obtain regulatory approval for any of our product candidates.

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administrative travel expenses;

and facility-related expenses, which include direct depreciation costs and allocated expenses for office rent and other operating costs, such as information technology.

and facility-related expenses,

which include direct depreciation costs and allocated expenses for office rent and other operating costs, such as information technology.

Costs to secure and defend our IP are expensed as incurred and are classified as general and administrative expenses.

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Our income tax provision may be significantly affected by changes to our estimates.

There was no income tax provision recognized for the three months ended March 31, 2023 and 2022.

There was no income tax provision recognized for the three and six months ended June 30, 2023 and 2022.

Results of Operations

Comparison of the Three Months Ended March 31, 2023 and 2022

Comparison of the Three Months Ended June 30, 2023 and 2022

The following table summarizes our condensed consolidated statements of operations for each period presented (in thousands):

Three Months Ended

March 31, Change

June 30, Change

Collaboration revenue $ 781 $ — $ 781

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Three Months Ended

March 31, Change

June 30, Change

$ 6,890 $ 26,472 $ (19,582)

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• $19.6 million decrease in expense related to our Cerebrum™ platform, driven primarily by:

◦ a $14.6 million decrease in clinical-related spend for our PRAX-114 program due to our strategic realignment in the second quarter of 2022;

◦ a $6.7 million decrease in spend for our PRAX-562 program, primarily related to the prior year completion of our Phase 1 clinical trial and prior year manufacturing campaign purchases, partially offset by startup costs related to the EMBOLD Phase 2 clinical trial in the first quarter of 2023;

◦ a $2.3 million decrease in activities for our earlier stage assets;

◦ a $1.3 million decrease in spend for our ulixacaltamide program, primarily due to the completion of a manufacturing campaign in the prior year;

◦ an $2.0 million increase in clinical-related spend for our PRAX-628 Phase 1 clinical trial.

• $2.4 million decrease in expense related to our Solidus™ platform, driven primarily by the payment of a $2.0 million license fee to Ionis Pharmaceuticals, Inc.

in January of 2022 upon exercise of our exclusive option to obtain the rights and license to further develop and commercialize PRAX-222;

◦ $11.5 million decrease in clinical-related spend for our PRAX-114 program due to our strategic realignment in the second quarter of 2022;

◦ $3.5 million decrease in spend for our PRAX-562 program, primarily related to prior year manufacturing spend and Phase 1 trial spend, partially offset by current quarter costs related to the EMBOLD Phase 2 clinical trial;

◦ $3.7 million decrease in spend for our ulixacaltamide program, primarily due to prior year manufacturing and Phase 1 spend, as well as decreased activity related to our Essential1 study;

◦ $1.6 million decrease in activities for our earlier stage assets;

◦ $0.7 million increase in spend for our PRAX-628 Phase 1 clinical trial.

• $5.7 million increase in expense related to our Solidus™ platform, driven primarily by a $6.9 million milestone payment due to Ionis Pharmaceuticals Inc., or Ionis, upon initiation of our PRAX-222 EMBRAVE study, offset by decreased activities for our earlier stage assets;

• $4.0 million decrease in personnel-related costs due to decreased headcount;

• $0.2 million decrease in indirect expenses, none of which were individually significant.

General and Administrative Expense

The $6.6 million decrease in general and administrative expenses was primarily attributable to the following:

• $3.6 million decrease in consulting expenses and professional fees;

• $2.4 million decrease in personnel costs due to decreased headcount;

• $0.6 million decrease in other general and administrative expenses.

Other income for the three months ended June 30, 2023 and 2022 was comprised of interest income on our cash, cash equivalents and marketable securities and investment premium and discount amortization.

Comparison of the Six Months Ended June 30, 2023 and 2022

The following table summarizes our condensed consolidated statements of operations for each period presented (in thousands):

Six Months Ended

June 30, Change

Collaboration revenue $ 1,464 $ — $ 1,464

Operating expenses:

Research and development 51,118 96,272 (45,154)

General and administrative 23,397 32,971 (9,574)

Total operating expenses 74,515 129,243 (54,728)

Loss from operations (73,051) (129,243) 56,192

Other income:

Other income, net 1,284 332 952

Total other income 1,284 332 952

Net loss $ (71,767) $ (128,911) $ 57,144

Collaboration Revenue

The $1.5 million increase in collaboration revenue is associated with the revenue recorded as research services are provided and costs are incurred under the Collaboration Agreement with UCB that was executed in December 2022.

Research and Development Expense

The following table summarizes our research and development expenses for each period presented, along with the changes in those items (in thousands):

Six Months Ended

June 30, Change

$ 18,025 $ 60,427 $ (42,402)

13,524 10,228 3,296

Personnel-related (including stock-based compensation) 14,904 21,876 (6,972)

Other indirect research and development expenses 4,665 3,741 924

Total research and development expenses $ 51,118 $ 96,272 $ (45,154)

The $45.2 million decrease in research and development expenses was primarily attributable to the following:

• $42.4 million decrease in expense related to our Cerebrum™ platform, driven primarily by:

◦ $26.1 million decrease in clinical-related spend for our PRAX-114 program due to our strategic realignment in the second quarter of 2022;

◦ $10.2 million decrease in spend for our PRAX-562 program primarily related to prior year manufacturing spend and Phase 1 trial spending, partially offset by costs related to our EMBOLD Phase 2 clinical trial in 2023;

◦ $4.9 million decrease in spend for our ulixacaltamide program, primarily due to prior year manufacturing spend as well as Phase 2a and Phase 1 trial spend, partially offset by increased Essential1 study activity in 2023;

◦ $4.0 million decrease in activities for our earlier stage assets;

◦ $2.8 million increase in spend for our PRAX-628 Phase 1 clinical trial.

• $7.0 million decrease in personnel-related costs due to decreased headcount;

• $3.3 million increase in expense related to our Solidus™ platform, driven primarily by initiation of the PRAX-222 EMBRAVE study in 2023 and associated $6.9 million milestone due to Ionis, partially offset by manufacturing expenses incurred in the prior year and a $2.0 million license fee expensed and paid to Ionis

in January 2022 upon exercise of our exclusive option to obtain the rights and license to further develop and commercialize PRAX-222;

• $0.9 million increase in indirect expenses, none of which were individually significant.

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The $9.6 million decrease in general and administrative expenses was primarily attributable to the following:

• $1.2 million decrease in consulting expenses;

• $1.7 million decrease in other general and administrative expenses, including decreased personnel costs.

Other income for the three months ended March 31, 2023 and 2022 was comprised of interest income on our cash, cash equivalents and marketable securities and investment premium and discount amortization.

• $4.9 million decrease in professional fees and consulting expenses;

• $3.1 million decrease in personnel-related costs due to decreased headcount;

• $1.6 million decrease in other general and administrative expenses, including insurance costs.

Other income for the six months ended June 30, 2023 and 2022 was comprised of interest income on our cash, cash equivalents and marketable securities and investment premium and discount amortization.

Liquidity and Capital Resources

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We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all.

To date, we have financed our operations primarily with proceeds from the issuance of redeemable convertible preferred stock and from the sale of common stock through an initial public offering, a follow-on public offering and at-the-market offerings under our shelf registration statement.

From inception through March 31, 2023, we have raised $544.1 million in aggregate cash proceeds from such transactions, net of issuance costs.

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $85.8 million.

On November 3, 2021, we entered into an Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, to provide for the offering, issuance and sale of up to an aggregate amount of $125.0 million of common stock from time to time in at-the-market offerings for which Jefferies acts as sales agent.

During the three months ended March 31, 2023, we issued and sold 8,403,809 shares under the Sales Agreement for aggregate net proceeds of $18.1 million after deducting commissions and offering expenses payable by us.

As of March 31, 2023, we have issued and sold a total of 12,391,079 shares under the Sales Agreement for aggregate net proceeds of $34.7 million after deducting commissions and offering expenses payable by us.

To date, we have financed our operations primarily with proceeds from the issuance of redeemable convertible preferred stock and from the sale of common stock through an initial public offering, follow-on public offerings and at-the-market offerings under our shelf registration statement.

From inception through June 30, 2023, we have raised $613.6 million in aggregate cash proceeds from such transactions, net of issuance costs.

As of June 30, 2023, we had cash and cash equivalents of $124.3 million.

In November 2021, we entered into an Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, to provide for the offering, issuance and sale of up to an aggregate amount of $125.0 million of common stock from time to time in at-the-market offerings for which Jefferies acted as sales agent.

We terminated the Sales Agreement in June 2023.

During the three months ended June 30, 2023, we issued and sold 5,888,128 shares under the Sales Agreement for aggregate net proceeds of $6.0 million after deducting commissions.

During the six months ended June 30, 2023, we issued and sold 14,291,937 shares under the sales agreement for aggregate net proceeds of $24.1 million.

We issued and sold a total of 18,279,207 shares under the Sales Agreement for aggregate net proceeds of $40.7 million after deducting commissions and offering expenses payable by us.

On June 21, 2023, we completed a public offering of:

(i) an aggregate of 64,449,690 shares of common stock at a public offering price of $0.95 per share, including the underwriters' full exercise of their option to purchase 9,299,690 additional shares of common stock, and (ii) pre-funded warrants to purchase 7,050,000 shares of common stock at a public offering price of $0.9499 per share.

The purchase prices per share for each pre-funded warrant represents the per share offering price for the common stock, less the $0.0001 per share exercise price for each underlying share.

Total net proceeds generated from the offering were approximately $63.4 million, after deducting underwriting discounts, commissions and other offering expenses payable by us.

The following table provides information regarding our cash flows for each period presented (in thousands):

Three Months Ended March 31,

Six Months Ended

Net cash (used in) provided by:

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The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in operating assets and liabilities, which are primarily the result of increased expenses and timing of vendor payments.

During the three months ended March 31, 2023, net cash used in operating activities of $32.8 million was primarily due to our $37.5 million net loss and $3.3 million in changes in operating assets and liabilities primarily related to a decrease in accrued expenses, partially offset by $7.9 million of non-cash charges primarily related to stock-based compensation.

During the three months ended March 31, 2022, net cash used in operating activities of $54.1 million was primarily due to our $68.7 million net loss, partially offset by $8.5 million of non-cash charges primarily related to stock-based compensation, and $6.1 million in changes in operating assets and liabilities primarily related to increases in accounts payable and accrued expenses.

During the six months ended June 30, 2023, net cash used in operating activities of $64.1 million was primarily due to our $71.8 million net loss and $6.3 million in changes in operating assets and liabilities primarily related to decreases in accrued expenses and accounts payable, partially offset by $14.0 million of non-cash charges primarily related to stock-based compensation.

During the six months ended June 30, 2022, net cash used in operating activities of $111.3 million was primarily due to our $128.9 million net loss, partially offset by $16.7 million of non-cash charges primarily related to stock-based compensation, and $0.9 million in changes in operating assets and liabilities primarily related to an increase in accounts payable and a decrease in prepaid expenses and other current assets.

Investing Activities

During the three months ended March 31, 2023, net cash provided by investing activities of $34.0 million was related to maturities of marketable securities.

During the three months ended March 31, 2022, net cash used in investing activities of $8.6 million was primarily related to the purchase of marketable securities, partially offset by the maturity of marketable securities.

During the six months ended June 30, 2023, net cash provided by investing activities of $39.0 million was related to maturities of marketable securities.

During the six months ended June 30, 2022, net cash provided by investing activities of $26.3 million was primarily related to maturities of marketable securities, partially offset by purchases of marketable securities.

Financing Activities

During the three months ended March 31, 2023, net cash provided by financing activities of $18.1 million consisted of net proceeds from at-the-market offerings.

During the three months ended March 31, 2022, net cash provided by financing activities of $1.2 million consisted of net proceeds from at-the-market offerings of $1.4 million and proceeds from the exercise of stock options, partially offset by the payment of issuance costs for our at-the-market offerings and the payment of taxes related to the vesting of restricted stock units.

During the six months ended June 30, 2023, net cash provided by financing activities of $87.7 million consisted primarily of net proceeds from at-the-market offerings and our June 2023 follow-on public offering.

During the six months ended June 30, 2022, net cash provided by financing activities of $1.7 million consisted primarily of net proceeds from at-the-market offerings of $1.4 million and proceeds from purchases of common stock under our employee stock purchase plan and from the exercise of stock options.

Plan of Operation and Future Funding Requirements

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• experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $85.8 million.

We are unable to estimate the exact amount of our working capital requirements, but based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of March 31, 2023 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024.

We have incurred recurring losses since our inception, including a net loss of $37.5 million for the three months ended March 31, 2023.

In addition, as of March 31, 2023, we had an accumulated deficit of $568.1 million.

We expect to continue to generate operating losses for the foreseeable future.

We have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year of the issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Since we expect that our cash, cash equivalents and marketable securities as of March 31, 2023 may not be sufficient to fund operations for at least the next twelve months from the date of issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there is substantial doubt about our ability to continue as a going concern.

Our future viability is dependent on our ability to raise additional capital to finance our operations.

We expect to finance our operations through potential public or private equity financings, debt financings, collaboration agreements or other capital sources.

Our inability to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.

There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

We have based our assessment on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Because of the numerous risks and uncertainties associated with product development and potential collaborations with third parties for the development of our product candidates, we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research

and development of our product candidates.

We are unable to estimate the exact amount of our working capital requirements, but based on our current operating plan, we believe that our cash and cash equivalents as of June 30, 2023 will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2025.

However, we have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.

Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including, but not limited to:

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We do not currently have any committed external source of funds.

Market volatility could also adversely impact our ability to access capital as and when needed.

Market volatility could also adversely impact our ability to access capital as

and when needed.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock.

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Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the

disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods.

The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

There have been no changes to our critical accounting policies from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” included in our Annual Report on Form 10-K filed with the SEC on February 7, 2023.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis